Analyzing International Relations and American Politics

What Does China’s Military Budget Reveal?

As a growing power economically and politically, China’s military and foreign policy have come under increasing scrutiny.[1] This scrutiny has only further increased as China has engaged in provocative and dangerous activities in both the East and South China Seas.[2] One way to measure Chinese military capabilities is through budgetary analysis. By examining spending trends both in absolute terms and relative to overall GDP, one can ascertain the capabilities of the People’s Liberation Army as well as China’s military priorities. While there are shortcomings with this purely quantitative approach – ignoring the quality of the officer core, the deployment patterns of troop formations, etc. – and inherent difficulties with measuring Chinese military expenditures, budgetary analysis can still offer a valuable approximation of a state’s military capabilities.[3]

Data from SIPRI

Data from SIPRI

Chinese military spending has been rising precipitously over the past decade and a half.[4] Indeed, between 2000 and 2015, military spending has risen almost 500%.[5] It is clear, therefore, that Chinese capabilities have increased tremendously over the past decade and a half. This analysis can be corroborated through qualitative evidence: new fighters like the J-20 have entered production, Chinese submarine quality has risen significantly, and China has expanded its ballistic missile capabilities. While these trends are concerning, they do not represent overall strategic intentions. To gauge long-term Chinese intention, one must look at relative spending trends. Here, the numbers are far less concerning. Chinese spending as a percentage of GDP has remained essentially constant for the past two and half decades, and spending as a percentage of total government spending has actually decreased significantly from 11.69% in 2000 to 6.3% in 2015. In short, China does not appear to be meaningfully increasing its investment in military capacity relative to other areas of government capacity. On the contrary, China seems to be maintaining a steady level of military spending relative to GDP, suggesting that fears of rapid Chinese militarization and arms racing are overblown.

Of course, Chinese military capabilities are increasing in absolute terms. With a growing economy comes a growing ability to finance and sustain military modernization programs. However, budgetary analysis suggests that Chinese military growth stems primarily from economic growth and not from a militaristic foreign policy agenda. Indeed, Chinese spending has tracked GDP very closely, hovering at around 2%. That being said, China now spends more than all of its neighbors combined, potentially allowing it to coerce neighbors and destabilize the Asia region. In other words, now that China has attained the proverbial hammer, it may start looking for nails.[6]

China still lags behind the U.S. in a number of significant areas, however, and thus current levels of Chinese military spending appear unlikely to erode America’s sizeable military advantage in any significant way.[7] With America spending 2.5 times what China does on defense, it would take China many years to challenge America’s global military power. That being said, the United States must continue to monitor and adapt to Chinese military capabilities because certain developments such as the development of “carrier killer” missiles and the expansion of the Chinese fleet potentially threaten U.S. forces in the Pacific. Moreover, while the United States must maintain a global presence, China is able to focus the preponderance of its military capabilities in Asia, potentially granting them regional dominance over the United States.

Despite these challenges, the United States should not be overly concerned about Chinese aggression in the near to medium term. While China is certainly a growing power increasingly willing to flex its muscles, its spending patterns suggest that it is unlikely to engage in a serious arms race with either the United States or regional American allies. China certainly possesses the capabilities and funding levels to engage in militarized disputes with its neighbors, but its relatively consistent military spending levels suggest that it is not looking for conflict.

Ultimately, China’s military spending over the next few years will be telling. As China’s economy slows and its population ages, it is far from clear that China will have the desire or ability to increase or even maintain military spending at the current level. If China expands its military spending in spite of slowing growth and increased budget pressures, that would be a worrying sign. If, however, China retrenches, shrinking military programs in order to compensate for economic pressures, we would know that the military does not hold undue influence within the Chinese government. Currently there is still too much uncertainty to predict the future of Chinese military activity with any degree of confidence.

[7] Brooks, Stephen G. and William C. Wohlforth. “The Rise and Fall of the Great Powers in the Twenty-First Century China’s Rise and the Fate of America’s Global Position.” International Security, Vol. 40, No. 3 (Winter 2015/16), pp. 7–53.

You are correct. A Chinese military retrenchment would indicate that the military does not hold undue influence within the Standing Committee. There was a typo in the original post that has since been corrected.